Apple Inc. and its iconic smartphone may return to growth when the tech giant reports holiday-quarter earnings after the market closes Tuesday, which would reverse the first declines since the iPhone was born.

iPhone unit sales have declined for three consecutive quarters, leading to the first fiscal-year revenue drop for Apple
AAPL, +0.68%
in more than a decade, but analysts expect Apple’s flagship product to show a rebound in the first fiscal quarter, which was also the first full quarter of iPhone 7 sales. Apple’s fiscal year starts with the holiday-shopping season, typically the largest quarter of the year for the company.

Credit Suisse analyst Kulbinder Garcha said his recent checks with Apple suppliers indicate that overall iPhone shipments “remain in line to ahead of expectations.”

Analysts remain cautious on fiscal 2017 as a whole, however, with growth expected to be relatively flat through the next few quarters. Longer upgrade cycles, increased competition and slow growth in emerging markets continue to be problems for Apple, weighing on its ability to meaningfully expand.

Earnings: While revenue is expected to gain, profit could take a slight hit for Apple. Analysts expect the company to report earnings per share of $3.22, down from $3.28 in the year-earlier period, according to FactSet. Estimize, a software platform that uses crowdsourcing from hedge fund executives, brokerages and buy-side analysts to predict earnings, predicts Apple earning $3.24 a share. Apple has a long history of beating the FactSet consensus, which tends to prove a slightly more conservative estimate compared with that of Estimize. Apple has topped the FactSet consensus estimate in nine of the past 10 quarters, but it has come up short of the Estimize forecast in three of the past six quarters.

Revenue: Sell-side analysts expect Apple to report revenue of $77.3 billion, according to FactSet, up from $75.8 billion in last year’s holiday shopping quarter. Contributors on Estimize predict revenue of $76.9 billion. Apple set guidance at a range of $76 billion to $78 billion when it last reported earnings in October. The company has missed the FactSet consensus estimate for revenue in three of the past four quarters, and has fallen slightly short of the Estimize consensus estimate four quarters in a row.

Revenue from the iPhone is projected to increase by 3%, to $53.1 billion from $51.6 billion in the year-earlier period, on a slight increase in units sold. Analysts believe Apple sold 78 million iPhones in the fourth quarter compared with 75 million a year ago, according to FactSet. Average selling prices are projected to fall, with the FactSet consensus predicting $687 per unit compared with $735 a year ago.

Stock reaction: Shares of Apple have slightly underperformed the market in the past three months, but have performed slightly better in the past 12 months. The stock has gained 6.5% in the past three months, while the Dow Jones Industrial Average
DJIA, +0.44%
, a 30-company index of which Apple is a member, has increased 10.5%. In the past year, Apple is up 30.5%, while the Dow is up 26% and the S&P 500
SPX, +0.39%
has increased 21.7%.

The average rating on Apple stock is the equivalent to buy, while the average 12-month stock target among a poll of roughly 40 analysts surveyed by FactSet is $130. Apple shares traded around $121.99 on Friday, flirting with a 52-week high.

What to watch for: Analysts will be focused on iPhone sales and the continued growth of software and services, which surpassed the Mac in 2016 to become Apple’s second-biggest revenue generator behind the smartphone. According to FactSet, revenue from services is forecast to reach $6.9 billion, compared with $6.1 billion in the year-earlier period.

CFRA Research analyst Angelo Zino, who has a “strong buy” rating on the stock, this week raised his price target on Apple’s stock to $140 from $130. He cited expectations that the quarter benefited from “strong iPhone 7 Plus sales,” which would indicate an increase in average selling prices, despite overall expectations of a decline.

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Zino, one of the more bullish Apple analysts on Wall Street, also believes Mac sales will improve following the company’s release of new Mac-family products at the end of October. The FactSet consensus calls for a year-over-year decline for Mac revenue, $6.5 billion versus $6.7 billion a year ago. However, data from IDC released last week showed PC shipments fell just 1.5% world-wide during the holidays, a marked improvement from the 10.6% decline last year.

Barclays analyst Mark Moskowitz, who is one of the more bearish analysts on Apple, downgraded Apple’s stock this week to equal weight from overweight and reduced his price target to $117 from $119, saying he doesn’t expect “meaningful upside potential,” despite Apple facing easier year-over-year comparisons to 2016, when it reported consistent iPhone declines.

Moskowitz pointed to services, Apple’s large cash balance and its “sticky ecosystem” as reasons why longer-term shareholders might want to stick around despite recent challenges. However, he doesn’t expect many of the company’s newer investments—in the enterprise, cloud computing, artificial intelligence and augmented reality—to move the needle for at least another year.

Other areas of interest for Apple’s post-earnings conference call could reflect recent news, such as the new Donald Trump administration and the company’s expanded patent fight with Qualcomm Inc.
QCOM, +1.07%
With a pro-business president in office, expect questions about tax and manufacturing implications, especially after iPhone manufacturing partner Foxconn Technology Co.
2354, +0.16%
said it was looking into building a plant in the U.S.

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